State lawmakers again postpone decision on aiding St. Paul teacher pension fund

Lawmakers again delayed making a decision on whether to provide state aid to the St. Paul school district's pension fund.

The Legislative Commission on Pensions and Retirement spent considerable time Tuesday, March 19, questioning whether to grant similar requests for state aid from the St. Paul fund and a Duluth teachers pension or whether it would be wiser to start the process of merging the two into a larger statewide fund.

"If you're going to think a merger is possible down the road, you save money by doing it now rather than later," King Banaian, a St. Cloud State University economics professor and former legislator, told the commission.

The commission tabled bills from the St. Paul Teachers' Retirement Fund Association and the Duluth Teachers' Retirement Fund Association and may reconsider them in two weeks.

After the meeting, commission chair Sen. Sandra Pappas, DFL-St. Paul, said the proposals -- even without considering a merger -- call for "big changes" and the lawmakers need more time to "be thoughtful and do what's right."

The bill to shore up the St. Paul pension fund aims to close a projected $16.7 million annual gap between what the fund needs and what it actually brings in, through a combination of cost savings, increased contributions and state aid.

Paul Doane, executive director of the fund, told the commission that administrators were willing to change their initial proposal to ask for a fixed $7 million per year in state aid, rather than a dynamic formula that would have been tied to investment returns.

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The proposal also increases employee and employer contributions and makes retiring early and returning to work after retirement less attractive. It also increases a benefit increase for employees, bringing their benefits in line with the statewide Teachers Retirement Association.

The fund currently has assets to cover only 63 percent of its liabilities. Without the fixes included in the proposal, the pension plan is expected to sink to 38 percent funded by 2036. With the fixes, it could reach 80 percent funded in less than 20 years.

In answering a question from Pappas, Doane said it would cost the state about $30 million per year, over the next 25 years, to merge with TRA. Most of this would be to pay down the fund's $560 million unfunded liability, with additional costs to bring the member benefits and retiree cost-of-living adjustments in line with what TRA members receive.

Doane said the fund is trying to recover from past funding problems and that the pension fund will be able to remedy this more sufficiently "on its own, with the state's assistance."

The Duluth Teachers' Retirement Fund Association asked for $6 million in additional state aid, plus contribution rate increases, a benefit increase, changes to early retirement provisions and a retiree cost-of-living adjustment of 1 percent, which is down from its original request of 2 percent.

Rep. Mike Benson, R-Rochester, questioned whether increasing member benefits and retiree cost-of-living adjustments were wise, particularly considering the fund has more retirees than working members and that trend is expected to worsen as the Duluth school district shrinks.

"You guys are in tough shape," Benson told the Duluth fund's executive director. "If and when we get to vote on this ... my suggestion is that -- I know it's too late in the season -- but we've got to consider a merger."